[SR-71]

Relevance warning - This thread might make sense primarily for folks hold a 9 - 5 job to put food on the table and who face a hard retirement at 55. Businessmen and professionals like lawyers and doctors, if interested should vote with the mindset tuned to pointers below

Having said that, the vote is to understand what one thinks is the ideal golden parachute one needs to build to have a comfortable retirement life. Please do vote with the following mindset

• You have no source of income other than your retirement kitty
• Your loans are paid off and you have no dependants other than your spouse
• Assume your savings earn 1% above the inflation rate (I have assume average inflation of 5%)
• You would like to lead a comfortable life that you lead today
• You retire at 55 and expect to live till the ripe age of 80 (of course the sooner we pass, the better )
• You don't expect any major life changing event that will threaten your retirement (there is simply no way to plan for this)
• If you plan to retire earlier, you can adjust your kitty value to the 55 barometer

With this assumption in mind, what do you think your retirement kitty should be. I have added a poll with few ball park numbers that I believe is below and above what I think is ideal. I strongly believe anything below the lowest number is not sustainable and anything above is simply god send.

If you are OK with it, please add your views on how you arrived at your golden number.

[raksrules]

I always thought 4-5 Cr (no calculation) would be great and I am no way near to that number and I still have 20 years of working left and I don't think I may even reach that number. But looking at how prices are increasing daily (Petrol itself is 6.5 Rs expensive than a week or so back in Mumbai), I think I will never stop working and may have to do gigs post retirement.

The only silver lining at this point is that I have 0 debt at this point and already own a flat and recently bought a car (fully paid, no loan - Also only bought since wife wanted one, else I have no need of a car). So I actively invest money every month and I am just banking on the stock market appreciating my investment. But the current war has brought some of my mutual funds in negative.

[dragonfire]

Assuming you live by with 1L of income today and returns from your investments keep up with inflation,

1L x 12 months x 25 years = 3 crores.

That is all you need to retire.

If you have an ancestral land, that is a nice cushion, which you can pass on to the next generation, if you don't end up using. If you don't have, add another Cr or two to build your own cushion.

[SR-71]

Originally Posted by dragonfire

Assuming you live by with 1L of income today and returns from your investments keep up with inflation

Inflation is a devil you shouldn't take lightly and if recent history is any indication, the spread between safe returns and inflation is very thin.

[vijaykr]

Originally Posted by SR-71

Inflation is a devil you shouldn't take lightly and if recent history is any indication, the spread between safe returns and inflation is very thin.

Correct, but wouldn't the amounts mentioned above depend on when one will get to 55? Because 3cr now will not have the same value as 3cr 5 years down the line assuming I'm 50 today. I may have to plan for more than 3cr to account for inflation, right?

Also, given current lifestyles, I feel not planning for any significant event in retirement span of 25 years for both self and spouse is very optimistic. The hope is that nothing should happen that will dent the retirement corpus, but better to set aside some amount aside for this.

[vivek.ks]

What we are discussing is commonly known as FIRE - Financially Independent and Retire Early. There are so many communities and forums dedicated to this concept across the world. Reddit in fact has India specific FIRE subreddit.

Personally, I ended up using the calculator @ https://plan.capitalmindwealth.com/ to get the kitty needed for me to spend a considerable amount post-retirement without impacting my lifestyle. I also sneaked in a BMW 3 series in this plan.

[dragonfire]

Originally Posted by SR-71

Inflation is a devil you shouldn't take lightly and if recent history is any indication, the spread between safe returns and inflation is very thin.

If RoI cannot keep up with inflation, people will stop investing. Even conservative instruments like FD will keep up with inflation.

Am I saying that it will never go wrong? No, but it is very unlikely. These are some of the assumptions that you should make to come up with a figure.

There are a 100 things that can go wrong. if you keep thinking about them all, don't even think about retiring.

[SR-71]

Originally Posted by dragonfire

Even conservative instruments like FD will keep up with inflation.

That is not true if you take prevailing FD rates into account cross leading banks and the CPI for the past one year. CPI as of Feb 2022 is 6.02% whereas a 1 year FD at SBI is 5.4%. And for someone in the 30% tax bracket, it falls to ~3.7 % post tax.

Looking at the chart below, with the exception of 2 months, the CPI has constantly beat 1 year FD returns for FY21-22

CPI for FY21-22

Originally Posted by vijaykr

Correct, but wouldn't the amounts mentioned above depend on when one will get to 55? Because 3cr now will not have the same value as 3cr 5 years down the line assuming I'm 50 today. I may have to plan for more than 3cr to account for inflation, right?

You are right. A simple way to arrive at the number is look at what you believe is comfortable now and then figure out what that amount is when you are 55. Then figure out what that amount is between 55 and 80. Finally work out the retirement number backwards to 55 with a good cushion for balance post your investment returns. For example someone who is 40 today and believes 1L a month today is good enough would need 2.09L per month when (s)he is 55 and 7.04L when (s)he is 80. This is assuming 5% as inflation. For such a person a 7C retirement kitty at 55 is like safe minimum assuming the the return on investment is 1% above inflation. So the younger you are, the more the kitty is.

And you were correct in pointing this out. Evidently, I churned out this number with my age bracket in mind :-)

Originally Posted by vivek.ks

I also sneaked in a BMW 3 series in this plan

ROFL, I did this math for myself exactly with the same sneak-in cause I have been actively looking at an upgrade. And I was like why not ask fellow forum members, what they think about it...

[adithya.kp]

A better question would be, what should one's liquid networth be, if one were to stop working today. Because, we are talking about 9-5 salaried people. Hence the conventional retirement at 55 etc is not practical. ( You may be laid off, even otherwise, you may not like the corporate world and want to get out). It can also be tweaked slightly. ie Not necessarily stop working. But working with less pressure. (You dont care about promotion, layoff etc)

I think its difficult to a put a number to it. Because, once you get there, you will think about a new number. Human tendency is to compare to others. Other scary thing is that, today freshers in a few sectors get 30 to 40 lacs per year. So the inflation after n years down the line can be very high.

[dragonfire]

Originally Posted by SR-71

That is not true if you take prevailing FD rates into account cross leading banks and the CPI for the past one year. CPI as of Feb 2022 is 6.02% whereas a 1 year FD at SBI is 5.4%. And for someone in the 30% tax bracket, it falls to ~3.7 % post tax.

(Nitpicking)

1) You have to compare annual inflation to annual FD rates.
2) When you are retired you hardly fall into the 30% rate. Also if you are a family of 3/4 your investments would be spread across the members.

And I was not advising to keep everything in FD. FD is the most conservative instrument I can think of. There are other low risk instruments and a mix of different types of investments will help you beat inflation.

[fazayal]

One should also add one or two properties in the retirement corpus which can give decent rental revenue. Advantage is that the rental revenue would more or less increase at same rate at inflation if not more.

[pandey.jai]

Is this retirement corpus including property or is this just money (cash/invested)?

Edit:

Also, I don’t think there is anything called “ideal retirement kitty”. When one has 1Lac, they would feel 1 cr is ideal. At 1cr, they will feel 3-5cr. It’s a never ending game.
I suppose the question could be what is your target retirement kitty.

[vinu_h]

I am actively investing in these:

• Good health
• Social network
• PF
• VPF
• NPS
• Real estate, and
• Equity

Without 1 & 2, the quantity/quality of rest just won't matter.

[Silverfire]

Most FIRE calculators suggest that your annual expense should be less than 4% of your corpus to last a traditional retirement. If you are retiring early and want to be conservative the number should be 3%. This means if your annual expense is 12 lakh currently, then you need a corpus of 4 crore to last infinitely (3% of 4 crores is 12 lakh). This also assumes your corpus is invested across equity and debt, and is earning you inflation beating returns.

If you plan to retire after 10 years, you will need to factor in inflation to calculate your target corpus. 12 lakh, after 10 years, with 5% inflation becomes 19.5 lakh. This means to support your current 12 lakh lifestyle, you will need to spend 19.5 lakh in 2032. At this point your corpus needs to be 6.5 crore.

These numbers look big and scary. Most folks use some of the following strategies to manage it with a smaller corpus:
1. Reduce expenses after retirement (especially if your kids are no longer dependent on you)
2. Move to lower cost of living locations. Moving to a tier 2 city vs Mumbai/Bengaluru can significantly reduce your expenses
3. Factor in inheritance which can give a boost to your corpus
4. Invest heavily early. Compounding is your friend and every rupee you save today grows exponentially, vs saving later.
5. Do not retire early and thus reduce the no income years. In that case these numbers will be much smaller. The above Calc is to retire and the money lasts you 40 years or more.

[SoumenD]

Only yesterday I met a FIRE aspirant in another thread and now a new thread on the topic. I have been into this journey for around 3 years and what I learnt is determining a corpus number is tough thanks to our inflation. 5% is conservative IMHO, 6-7% is more like it. Having said that I don’t have a set number but an X. X being my annual expense. 40X depending on the then X.

FDs I trust only for emergency funds and don’t expect them to give me any real returns (ROI usually is lesser than inflation). Equity is what I am banking upon and even after I FIRE, will go with bucket strategy. Debt part for usual cost of living and emergency fund, rest in equity. Will keep rebalancing every few years as the debt part dwindles.

Btw does anyone here follow the reddit sub FireIndia? The numbers people share there are insane. 20somethings sitting on crores worth corpus. Gives massive inferiority complex. I stopped following after a few weeks